WH Losing Favor But Maintains 10% Dividend

Investors should not totally ignore any stock that is on the decline and losing interest from the investors. Just because a stock is on the decline does not mean it will continue to be on
the same path. Many stocks eventually return back to its average of the price or to its average return of an industry. Let’s take a look at WSP Holding (WH), which is in the oil services manufacturing business. This company makes drilling, casing and tubing pipes to extract crude oil and gas from China. For almost 9 months, WH has been on decline losing more than 50%, while general oil services sector such as OIH was up about 20% during that same span. We should take notes that WH does offer dividend which yields more than 10% and it’s P/E is less than 7.

From one year chart, there is a major downward resistance line, which has been broken early 2010 and has been trading sideways ever since. There is also a support line just below $3. My opinion for WH is that it will eventually catch up to its sector in 2010 and represents a great buying opportunity. The stock is relatively cheap and there is a high potential for return on investment. I recommend a Stop order at $2.55, which represents a slightly less than the low of WH. What are your thought on WH? Do you think there is a further decline remaining in this stock?